The economics of targeted mitigation in infrastructure

Franck Lecocq () and Zmarak Shalizi

Climate Policy, 2014, vol. 14, issue 2, 187-208

Abstract: Once established, long-lived capital stock (LLKS) such as infrastructure can lock-in a stream of GHG emissions for extended periods of time. Historical examples from industrial countries suggest that investments in LLKS projects and networks are often lumpy and concentrated in time, and often generate significant indirect and induced emissions besides direct emissions. Urbanization and rapid economic growth suggest that similar investments in LLKS projects and networks are being or will soon be made in many developing countries. In their current form, carbon markets do not provide correct incentives for mitigation in LLKS because the constraint on emissions is limited to developed countries and extends only to 2012. Targeted mitigation programmes are thus necessary where LLKS is being built at a rapid rate to avoid getting locked into highly emissions-intensive LLKS. Even if carbon markets were extended geographically, sectorally, and over time, public intervention would still be required to ensure that indirect and induced emissions are accounted for, to facilitate LLKS project/network financing that bridges the gap between carbon revenues accruing over time and capital needed up front to finance lumpy investments, and to internalize other externalities (e.g. local pollution) and/or lift other barriers that penalize low-emissions alternatives relative to high-emissions ones. Policy relevance LLKS is rapidly being built in developing countries and 'renewed'/upgraded in developed ones. Investment in LLKS programmes/networks, not just in individual projects, tends to be concentrated in time, two-thirds of which typically takes place in the first quarter of the programme's operating life. Initial/prototype projects can lock in commitment to a particular technology for the whole programme, thus requiring they be evaluated as part of a programme, and not on a stand-alone basis. In addition, indirect and induced emissions of LLKS programmes can be significant. However, scarce empirical evidence affects the utility of cost-benefit analysis in selecting projects or programmes. Finally, addressing the carbon externality alone (whether by market prices, taxes, or regulations) is insufficient to create a level playing field between low- and high-emission LLKS. Removing non-price barriers requires identification of binding constraints, selection of instruments to address them, and mechanisms to learn from and share experiences amongst countries and regions.

Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/10.1080/14693062.2014.861657 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:tcpoxx:v:14:y:2014:i:2:p:187-208

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/tcpo20

DOI: 10.1080/14693062.2014.861657

Access Statistics for this article

Climate Policy is currently edited by Professor Michael Grubb

More articles in Climate Policy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().